BofA Securities downgrades Universal Health Services stock on Medicaid cuts

Investing.com - BofA Securities downgraded Universal Health Services (NYSE:UHS) from Neutral to Underperform and lowered its price target to $185.00 from $215.00. According to InvestingPro data, UHS currently trades at a P/E ratio of 9.7x and maintains a "GREAT" overall financial health score.

The downgrade reflects BofA’s concerns about increasing headwinds from cuts to Medicaid and Affordable Care Act (ACA) exchanges within the recently passed Reconciliation Bill.

BofA Securities believes these legislative changes will likely lead to lower volume growth and increased bad debt for hospitals, with UHS having particularly high exposure to these challenges.

The firm specifically cited UHS’s vulnerability to State Directed Payments (SDPs) and the expiration of enhanced subsidies as key factors in the downgrade decision.

BofA’s revised price target is now based on 6.7x 2026E EBITDA, down from the previous 7.7x 2025E multiple, reflecting lower estimates and a reduced target multiple due to these anticipated headwinds extending into 2026. Currently, UHS trades at an EV/EBITDA multiple of 7.0x, with analyst price targets ranging from $200 to $280, suggesting potential upside despite the downgrade.

In other recent news, Universal Health Services has declared a quarterly cash dividend of $0.20 per share, payable on June 16, 2025, to shareholders of record as of June 2, 2025. This announcement underscores the company’s financial stability and commitment to shareholder value. Meanwhile, UBS has reaffirmed its Buy rating with a $280.00 price target, despite challenges in the behavioral health segment, noting robust pricing growth in the first quarter. Morgan Stanley (NYSE:MS) has maintained an Equalweight rating with a $200.00 price target, highlighting solid utilization trends in acute care and potential for improved performance relative to peers. Cantor Fitzgerald has reiterated a Neutral rating with a $227.00 price target, observing staffing pressures in several cities but noting strong pricing discipline. The Tennessee Directed Payment Program is expected to positively impact revenue per admission in the second quarter of 2025, according to Cantor Fitzgerald’s analysis. These developments reflect ongoing dynamics in Universal Health Services’ operational and financial landscape.

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